What’s the Deal With These Home Warranties Anyway?

Buyers and sellers seem to be confused about home warranties.

Questions I hear include: Are they worth it? Does that mean the house has passed some kind of test to qualify? Should a buyer prefer a house because the sellers are offering a warranty? Here are points to consider:

For Sellers

– Are there any old systems in your house that might need to be replaced in the next 1-2 years? (heating and air conditioners, water heater) – Is your house priced to attract 1st time homebuyers in your area? – How much does the warranty cost and what items are included? – If something breaks while the house is on the market, will you have the money to get it fixed?

For Buyers

– When you move into the home you purchase, will you have any money to pay a contractor if something breaks in the first six months? – Are any of the major (ie expensive) systems nearing the end of their life expectancy? (dishwasher, water heater, heating and air conditioning) – Do you know how to maintain a home? When to close crawlspace vents, how often to have your heating and air conditioning checked, how to winterize your outside water faucets in the winter? – Are you familiar with the city or county? Do you know who you would call if something breaks to find a reputable contractor?

-Home warranties can be great for buyers and sellers, especially for the first year you are in a home and getting used to it. Sellers can also pay for the option of having the warranty cover them in most cases while the home is on the market. A home warranty, however, does not replace a thorough home inspection for the buyer and it does not prevent a seller from having to do repairs before closing. A home warranty requires you to use their contractors so you cannot call someone from Angie’s List or who was recommended by a neighbor.

-Warranty companies are 3rd party companies – the house does not have to be tested or inspected to get a warranty. Home warranties cover most mechanical systems but they do not cover structural components. They have exclusions and limits so you should read the contract to know specifically what is covered and what is not. Warranties usually cost between $389-550 depending on the company and the exact level of coverage. If a seller offers a warranty it indicates to the buyer that the seller wants the buyer to feel confident their home will be a good investment. Buyers can also request a warranty from the seller during contract negotiations or purchase the warranty for themselves.

So, what is the final verdict – should you get a home warranty? Well, as my accountant likes to say, it depends. Ask your real estate professional and then decide for yourself.